IN
THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN
OPERATIONS IN THE TREND FIELD, MORGAN COUNTY, COLORADO

)

)

)

)

CAUSE
NO. 125

ORDER
NO. 125-5

REPORT OF THE
COMMISSION

This cause came on
for hearing before the Commission on September 21, 1987, at 9:00 a.m., in Room
110, State Centennial Building, 1313 Sherman Street, Denver, Colorado, after
giving Notice of Hearing as required by law, on the application of Thermal
Exploration, Inc., for an order approving a certain Unit Agreement and Unit
Operating Agreement for the Tren [sic] (‘D’ [sic] Sand) Unit Area, providing
for involuntary unit operations of the reservoir consisting of the ‘D’ [sic]
Sand underlying certain lands in the Trend Field", Morgan County,
Colorado.

FINDINGS

The Commission finds as follows:

1. Thermal
Exploration, Inc., as applicant herein, is an interested party in the subject
matter of the above-referenced hearing.

2. Due notice of
the time, place and purpose of the hearing has been given in all respects as
required by law.

3. The
Commission has jurisdiction over the subject matter embraced in said Notice,
and of the parties interested therein, and jurisdiction to promulgate the
hereinafter prescribed order.

4. The ‘D' Sand
was encountered in the interval between the depths of 6180 feet to 6200 feet in
Well No. 1 Longstreth, located in the NW1/4 SW1/4 Section 35, Township 5 North,
Range 60 West, 6th P.M. Said ‘D' [sic] Sand, as so encountered, is a common
source of supply and has been defined and determined by drilling, to be productive
underlying the following described lands in Morgan [sic] County, Colorado,
to-wit:

Township 5 North,
Range 60 West 6th PM [sic]

Sec. 34: SE1/4, NE1/4
SW1/4, N1/2 SE1/4 SW1/4

Sec. 35: N1/2 SW1/4,
SW1/4 SW1/4, N1/2 SE1/4 SW1/4, NW1/4 SE1/4

containing 400 acres,
more or less.

5. The terms and
conditions provided by the Unit Agreement and Unit Operating Agreement meet the
requirements of the statute and are just and reasonable to all interests
contained within said unit area. The plan for unit operations as presented by
the Applicant, providing for a secondary recovery program by the injection of
water into the ‘D' [sic] Sand reservoir underlying the Trend (‘D' [sic] Sand)
Unit Area, as described herein is necessary to increase the ultimate recovery
of oil and gas and the value of the estimated additional recovery of oil and
gas exceeds the estimated additional cost incident to conducting such
operations.

6. The
provisions contained in said Unit Agreement and Unit Operating Agreement are just
and reasonable and include the following:

a.

The description of
the pool to be so operated;

b,

The nature of said
operation;

c.

The allocation to
the separately owned tracts in the Tren [sic] (‘D' [sic] Sand) Unit Area of
all the oil and gas that is produced from said Unit Area and is saved;

d.

The provisions for
the credits and charges to be made in the adjustment among the owners in the
Trend (‘D' [sic] Sand) Unit Area for their respective investments in wells,
tanks, pumps, machinery, material and equipment contributed to the unit
operations;

e.

The provisions
providing how the costs of unit operations, including capital investments,
shall be determined and charged to the separately owned tracts, and how said
costs shall be paid, including the provision providing when, how, and by whom
the unit production allocated to an owner who does not pay the share of the
cost of unit operations charged to such owner, or the interest of such
owners, may be sold and the proceeds applied to the payment of such costs;

f.

The provision for
the supervision and conduct of the unit operations, in respect to which each
person shall have a vote with a value corresponding to the percentage of the
costs of unit operations chargeable against the interest of such persons; and

g.

The time when the
unit operations shall commence, and the manner in which, and the
circumstances under which the unit operations shall terminate.

8. Testimony
presented at the hearing indicates that said Unit Agreement and Unit Operating
Agreement have been approved in writing by approximately 94% of the working
interest owners and 94.22% by owners of the production and proceeds
attributable to royalty overriding royalty and production payments.

ORDER

NOW, THEREFORE, IT IS
ORDERED,: [sic]

1. The Unit
Agreement and Unit Operating Agreement covering lands in the Trend (‘D’ [sic]
Sand) Unit Area, which agreements are attached to, and made a part of the
original order of this Commission on file in the office of the Commission, are
approved as being in the public interest for conservation.

2. The ‘D’ [sic]
Sand reservoir, common source of supply, underlies the following lands in
Morgan County, Colorado, to-wit:

Township 5 North,
Range 60 West 6th PM [sic]

Sec. 34: SE1/4, NE1/4
SW1/4, N1/2 SE1/4 SW1/4

Sec. 35: N1/2 SW1/4,
SW1/4 SW1/4, N1/2 SE1/4 SW1/4, NW1/4 SE1/4

containing 400 acres,
more or less.

3. The
provisions contained in said Unit Agreement and Unit Operating Agreement as
they pertain to 34-60-118 of the Oil and Gas Conservation Act are just and
reasonable, and are incorporated herein as the Commission's plan of involuntary
unit operations for such lands.

4. The secondary
recovery project by the injection of water into the ‘D’ [sic] Sand reservoir of
the Trend (‘D’ [sic] Sand) Unit Area, as presented by applicant, is hereby
approved as being necessary to increase the ultimate recovery from said
reservoir, and the operator is authorized to inject into said reservoir through
injection wells in such quantities as shall be reasonably determined by the
operator to best achieve the maximum recovery of oil without waste.

5. In the event
that it becomes necessary in the future to convert additional producing wells
to input wells; to plug and abandon certain wells in the Unit Area, or to drill
additional producing or input wells as dictated by developments in the source
of the operations of the waterflood, the Unit Operator is authorized to make
such changes in the operation of the project as may be required to facilitate
the efficient development thereof.

6. All injection
wells shall be approved by the Director in accordance with the rules and
regulations of the Commission.

IT IS FURTHER
ORDERED, that the provisions contained in the above order shall become
effective forthwith.

IT IS FURTHER
ORDERED, that the Commission expressly reserves its right, after notice and
hearing, to alter, amend or repeal and/or all of the above orders.